Substantial injustice: You will know it when you see it…

05/09/2022

Introduction

Although perhaps now part of the long-forgotten past, there was once a time when courts would routinely allow recovery of the ‘honest elements’ of claims which were otherwise tarnished by fundamental dishonesty. However, that landscape was swiftly changed by the successive impacts of Summers v Fairclough Homes [2012] 1 WLR 2004, the Jackson reforms, and section 57 of the Criminal Justice and Courts Act 2015 (“CJCA 2015”). 

Now, the default position is that set out by sections 57 (1) to (3) of the CJCA:

(1)          This section applies where, in proceedings on a claim for damages in respect of personal injury (“the primary claim”) –

(a)  the court finds that the claimant is entitled to damages in respect of the claim, but

(b)  on an application by the defendant for the dismissal of the claim under this section, the court is satisfied on the balance of probabilities that the claimant has been fundamentally dishonest in relation to the primary claim or a related claim.

(2)          The court must dismiss the primary claim, unless it is satisfied that the claimant would suffer substantial injustice if the claim were dismissed.

(3)          The duty under subsection (2) includes the dismissal of any element of the primary claim in respect of which the claimant has not been dishonest.   

It is worth briefly pausing to note that section 57 of the CJCA will only apply where there is an underlying legitimate claim. Of course, where the whole claim is a fabrication (e.g., phantom passenger claims), any finding of fundamental dishonesty would be such that the claimant would not be able to prove any element of their claim, so the question of dismissing remaining parts of the claim is irrelevant.

Case Law

The definition of fundamental dishonesty and how to approach such allegations has been the subject of numerous appellate judgments. However, there remains comparatively little guidance as to CJCA 57 (2) and what is meant by “substantial injustice”.

It was briefly considered by Mr Justice Julian Knowles in LOCOG v Sinfield [2018] EWHC 51 (QB), where he held that something more than mere loss of damages to which a claimant would otherwise be entitled was required. The default position was that a fundamentally dishonest claimant ought to lose their claim in its entirety. This approach was endorsed by HHJ Sephton QC giving judgment in Iddon v Warner [2021] EWHC EWHC 587 (QB).

In addition to endorsing the judgment of Knowles J, HHJ Sephton QC found that Mrs Iddon had not suffered substantial injustice by reason of purchasing a new house which she would have to sell if her entire claim was dismissed. Parallels were drawn with the potential need to repay an interim payment under CPR 25.8(2)(a). Accordingly, that a claimant has changed their own position in reliance on the honest elements of their claim does not seem to amount to substantial injustice.

In assessing the question of substantial injustice, HHJ Sephton QC performed a balancing exercise. The extent of Mrs Iddon’s dishonesty was considered, and it was held that the “very grave” nature of this far outweighed any injustice that she would suffer.

Most recently, Knowles J has revisited the definition of substantial injustice in Woodger v Hallas [2022] EWHC 1561 (QB). This was a matter where, at first instance, HHJ Godsmark QC had made findings as follows:

(i)  Mr Woodger had been fundamentally dishonest. He had exaggerated the extent of ongoing hip symptoms and their effects on his everyday life. He had concealed income. Accordingly, he could not substantiate a loss of earnings claim which, until amended on receipt of surveillance evidence, had been pleaded in excess of £500,000.

(ii) The true value of Mr Woodger’s claim was £74,460. This was comprised as follows: PSLA £40,000; loss of earnings £12,545; past care £7,650; travel and clothing £1,765; and Smith v Manchester £12,500.

(iii) It would be substantially unjust to dismiss the whole claim under CJCA 2015, s57, but those legitimate elements relating to loss of earnings (i.e. the award for loss of earnings and the Smith v Manchester) should be dismissed. The elements remaining and for which Mr Woodger could recover were “sound and uncontaminated”. Further, the injuries themselves were serious and of continuing effect. Finally, the care element of the claim was made on behalf of innocent people who had selflessly assisted Mr Woodger.

In contrast to HHJ Godsmark QC, Knowles J determined there was no adequate basis to find that Mr Woodger would suffer substantial injustice. First, and following Sinfield and Iddon, that there were legitimate elements of the claim which would be lost was not sufficient. Something more was required. Secondly, Mr Woodger’s injuries were not the most serious and he had made a substantial recovery. Finally, HHJ Godsmark QC erred in considering the impact on caregivers. CJCA 2015, s57 (2) expressly states that “The court must dismiss the primary claim, unless it is satisfied that the claimant would suffer substantial injustice…” [emphasis added].

Even if Knowles J was wrong in finding Mr Woodger had suffered no injustice, he endorsed the balancing exercise performed in Iddon. Any injustice would be outweighed by Mr Woodger’s serious dishonesty, which was sustained for a considerable period of time, and had involved third parties on his behalf.

Discussion and Conclusion

Knowles J’s conclusion on substantial injustice, rather than to provide a definition or examples, was simply to state that county court judges will generally know it when they see it. For my part, I am increasingly of the opinion that CJCA 2015, s57 (2) might be a wholly toothless provision. However, I would offer up two possible scenarios where it may still bite, but remains to be tested:

(i) Where a modest dishonesty has a disproportionate and unintentional effect on the value of a claim. However, a claimant would surely understand the basis of their claim’s valuation, so it is difficult to see how this might work practically.

(ii) Where a claimant has been pressured into dishonesty by a third party. In particular, one could see how this might engage CJCA 2015, s57 (2) in matters involving protected parties.

Although there remains no formal test for substantial injustice, it would appear to now be settled that there is a balancing exercise involving any injustice to the claimant being weighed against their dishonesty. Where the threshold lies for that balancing exercise being resolved in a claimant’s favour remains unanswered, but such a finding looks likely to be a rarity.